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wellbiz
12-16-2010, 01:58 PM
Hi all,

I am trying to figure out what the industry norm is as far as billing and collections are concerned.

I finished my first year full time and was profitable and satisfied with my success. However I did have two lawn clients that didn't pay. Luckily I stopped service before it got out of hand. I take full responsibility for the losses as I was so eager to get customers I would take on just about anyone as a client. In the end 99% of my clients have been great. It is just that I need to institute a company policy next season for payment terms and want to get an idea of what everyone else has found successful. (and yes I will be alot more selective with the clients I work with next season)

What I am trying to figure out is:

a) If you have a month to month customer who is not on a contract do you still have them sign a work order or a copy of the estimate before you provide any services?

b) Do you offer an incentive for the client to pay early (Pay by the 15th and save x%) or do you penalize them with a late charge if they pay after a certain date?

c) Do you stipulate a due date, require payment due on receipt, or allow for 30 days payment?

d) If you have a slow pay or no pay client how do you handle it? Phone call, letter, collections agency, tell Santa Claus:D


Thanks in advance,
Jay

Steve
12-17-2010, 01:05 PM
Jay,

It sounds like you are doing a great job with your billing right now.

How did you handle things when those 2 customers stopped paying? Did you or are you looking to do anything to recover that money or did you determine it was not worth it.

wellbiz
12-18-2010, 09:17 AM
Jay,

It sounds like you are doing a great job with your billing right now.

How did you handle things when those 2 customers stopped paying? Did you or are you looking to do anything to recover that money or did you determine it was not worth it.

Thanks Steve, yea most local guys I talk to say I am lucky to only have two no pays. Funny thing is one paid all summer, but is late on the last invoice. I know its not much money (only about $200) total but it is the principal.

I have made phone calls and sent a letter. I dont want to threaten collections or small claims court, but that is always an option. I suppose my next tactic will be to offer a discount on the amount owed if they pay by the end of the month. I may end up with nothing, but you never know.

I think next year I will choose my clients more carefully along with trying to get them on an automatic payment plan of some type. I am looking into what is possible on that front now. I may also offer a small 2-3% discount if they pay before the 15th of the month.

I am open to any advice.

Jay

jklawncare
12-18-2010, 09:31 AM
Send a false letter looking very official like it was from an attourney stating that if the amount due in invoice #_ is not paid by __/__/__ then further steps will be made to retrieve collections in a small claims court.

and include a copy of the invoice

usually people will pay because they dont want to deal with the troubles of court so they finally just hand it over.. that is something you can try.

I dont offer incentives for paying customers..thats what they are supposed to do..however if they pay for 2 months or over in advance i give them a 10% discount but im not sure if ill be keeping that this year..maybe lowering it to 5% or something of that nature..

I dont service any customers without there name on paper. Even temporary Customer have a temporary agreement that states when services start and stop and has most rules of the regular agreement. Its just sort of a backup plan to have incase they think they wont have to pay.

I assume it takes 5 days to ship my invoices (a bit generous) so i state the due date on my invoice. i ask it to be payed 15 days after the invoice is recieved..gives them 10 days to pay and 5 days to send. If it dosnt arrive in 5 days of due date its a 5% charge of the invoice

for every week over that its a 10% charge and once it hits 3 weeks furthur action will be taken

I only really had one customer that is slow on payments and i just emailed him and called him until he finally payed up but it was never over a weeks wait.

wellbiz
12-18-2010, 09:48 AM
Send a false letter looking very official like it was from an attourney stating that if the amount due in invoice #_ is not paid by __/__/__ then further steps will be made to retrieve collections in a small claims court.

and include a copy of the invoice

usually people will pay because they dont want to deal with the troubles of court so they finally just hand it over.. that is something you can try.

I dont offer incentives for paying customers..thats what they are supposed to do..however if they pay for 2 months or over in advance i give them a 10% discount but im not sure if ill be keeping that this year..maybe lowering it to 5% or something of that nature..

I dont service any customers without there name on paper. Even temporary Customer have a temporary agreement that states when services start and stop and has most rules of the regular agreement. Its just sort of a backup plan to have incase they think they wont have to pay.

I assume it takes 5 days to ship my invoices (a bit generous) so i state the due date on my invoice. i ask it to be payed 15 days after the invoice is recieved..gives them 10 days to pay and 5 days to send. If it dosnt arrive in 5 days of due date its a 5% charge of the invoice

for every week over that its a 10% charge and once it hits 3 weeks furthur action will be taken

I only really had one customer that is slow on payments and i just emailed him and called him until he finally payed up but it was never over a weeks wait.

Thanks for the great advice. I like the idea about not discounting for the early payment, but instead charging a late fee. I also agree about getting their name on paper. I was way to eager to get clients and dropped the ball alot on that one. I really want to get them on a autopay plan where I just charge their credit cards. I think that will really help with my receivables and help cut down on the late or no pays. I need to check with the state, as every state is different when is comes to the amount you can charge for late fees.

Thanks again
Jay

Growing Green
12-18-2010, 10:23 AM
I'm not looking forward to this process. Would you be able to send me a copy of what you present to the customer that gets their name on paper and shows them what they are getting? I would appreciate that and hopefully this could keep me from making a rookie mistake of not holding customer accountable.

Who do you use to run the payments? I did research on this and found paypal to be the best as I can send monthly invoices out through email and it automatically keeps up with who has paid and who hasn't. It will also send out reminders for those late payers. They charge 2.99% and a $.30 fee for each transaction, but they had a lot of benefits.

I do not want to waste my time with mailing stuff.

Matt

jklawncare
12-18-2010, 10:26 AM
Thanks for the great advice. I like the idea about not discounting for the early payment, but instead charging a late fee. I also agree about getting their name on paper. I was way to eager to get clients and dropped the ball alot on that one. I really want to get them on a autopay plan where I just charge their credit cards. I think that will really help with my receivables and help cut down on the late or no pays. I need to check with the state, as every state is different when is comes to the amount you can charge for late fees.

Thanks again
Jay

I did the same as you
i got eager and excited about getting calls and wanted to get my business up as fast as i cold without paying any attention to who i was oging to be servicing.
That is why my company fell out at the end of the season and i gave up. But after that. I realized that i love doing this and im gonna do it right this time.. i look at the past as a trial and error period. I think i have alot more information and understanding of what WILL hapend and when may happen. And ill know how to handle it already.

jymie
12-18-2010, 02:06 PM
I'm not looking forward to this process. Would you be able to send me a copy of what you present to the customer that gets their name on paper and shows them what they are getting? I would appreciate that and hopefully this could keep me from making a rookie mistake of not holding customer accountable.

Who do you use to run the payments? I did research on this and found paypal to be the best as I can send monthly invoices out through email and it automatically keeps up with who has paid and who hasn't. It will also send out reminders for those late payers. They charge 2.99% and a $.30 fee for each transaction, but they had a lot of benefits.

I do not want to waste my time with mailing stuff.

Matt

Probably the easiest method is when you go to the house to estimate what ever it is that you are there for, have them sign an estimate stating the services they want you to with the pricing with a line stating I/We accept this agreement and date it. I have mine made up to be in triplicate (carbon type so you can write on top copy and it goes on all copies) so that I can give the customer two copies of the estimate, the front page then the second page. I keep the last page as my copy of what I wrote down for the estimate. That way if they need time to decide they can return the top copy with the signature and still have a copy for themselves. Always have the top copy as that holds the actual signature of the customer.

Steve
12-18-2010, 04:50 PM
Jay,

Is this something you can just go to their door and knock on it and talk to them? Before it's notched up to the next level?

They might be able to pay you right then and there and you can move forwards.

If you keep it friendly, you might be able to keep them as a customer into the new year.

wellbiz
12-18-2010, 05:16 PM
Jay,

Is this something you can just go to their door and knock on it and talk to them? Before it's notched up to the next level?

They might be able to pay you right then and there and you can move forwards.

If you keep it friendly, you might be able to keep them as a customer into the new year.

Good points. I have a pretty good feeling that I will be paid by the one client. Its probably just a combo of being busy and money being tight around the holiday. I will exhaust every possible option before I amp it up with a strongly worded letter or more. The one account is a good one located close to others in the area and it would be a shame to loose it.

Jay

Steve
12-21-2010, 06:37 PM
Keep us posted on what you decide to do and what the outcome is.

lukus223
12-22-2010, 10:31 PM
I think the occaisionaly non-payer is just part of doing business. We had two or three this year. Most were for $50 - $200. We get a signed agreement with all of the work we do. We send a bill at the end of the month, no advance pays or anything like that. The only exception is clean ups, we want 50% up front if they are not a recurring customers.

I think it shows a level of professionalism and trust when you sign someone up and just let me them know they will get the bill. We don't accept payment up front or give discounts. We do charge late fees, but only when someone really gets behind. Before we do we usually place a call and let them know if they go ahead and make the payment this week, we'll waive the fees.

Steve
12-23-2010, 12:05 PM
I think the occaisionaly non-payer is just part of doing business. We had two or three this year. Most were for $50 - $200.

How did you handle collections on such customers?

lukus223
12-23-2010, 08:01 PM
How did you handle collections on such customers?

Couple of emails and letters. Phone calls as well.

A couple the phones were disconnected and the other said they just couldn't pay. Lost their job, losing their house. I didn't want to go to the house, afraid i might get pissed and get arrested. I let my wife handle the collections. she can be the "bad cop". That way I can be the friendly face and no awkwardness between the client and I

Steve
12-24-2010, 02:24 PM
If you are thinking they may lose the house, should a lien be put on it for the amount owed? So you have to get paid before it is sold and since it may be sold soon, you might get your money sooner rather than later?

wellbiz
01-07-2011, 01:45 PM
Just wanted to let you guys know I did receive payment from one of my past due clients. I made a few phone calls and sent a nice, but pointed letter and the client called me back and sent payment. Pretty sure I am going to have to write off the other past due account, but overall I am satisfied. You live and learn.

Jay

Steve
01-09-2011, 03:11 PM
I am glad you received payment.

Has this experienced, changed any of your procedures or the way you will handle things in the future?

wellbiz
01-09-2011, 03:50 PM
I am glad you received payment.

Has this experienced, changed any of your procedures or the way you will handle things in the future?

Steve,

Yes and no. I figure a customer who is going to stiff you will do it no matter what if that was their main intention. However I have come up with a plan for next year

1. I will be using a triplicate proposal form from NEBS and all customers will have to sign before any work is done.

2. Going to change the due date for lawn care invoices from Net 30 to be due by the 15th. No credit due for landscaping jobs over $100.00. I expect payment or a check at the end of the job. A plumber or builder would expect the same why shouldn't a landscaper.

3. Hope to institute an auto-billing program for lawn care clients billing their credit card on the first day of the month for the previous months service. This may have to wait if the credit card processing fees are too high. I want early payment but not at the expense of profits. In other words If I can expect to have $250.00 a year in no pays and the credit card fees cost $500 a year it seems to me that this may wait until I grow the business a little larger to offset the costs.

4. Follow my gut. If a prospective client seems like a risk. Walk away.

5. I will be concentrating my marketing on landscaping and less on lawn care. Lawn care is very competitive in my area and all the lowballers have really driven down prices. However landscaping is still not as competitive and offers a bigger profit payoff.


Jay

Steve
01-09-2011, 04:58 PM
No credit due for landscaping jobs over $100.00. I expect payment or a check at the end of the job.

What about materials and such? Should the customer pay up front for that or anything else?

wellbiz
01-10-2011, 07:39 AM
What about materials and such? Should the customer pay up front for that or anything else?

Steve,

Yea forgot to mention that. I am thinking any job where materials are over $500 I will require a deposit or downpayment... Not sure if it will be for the complete amount, but I am considering it.

Jay

Steve
01-11-2011, 03:02 AM
I do wonder if it would be an easy enough sell to just ask for all material costs up front.

What's your view on that?

wellbiz
01-11-2011, 07:13 AM
I do wonder if it would be an easy enough sell to just ask for all material costs up front.

What's your view on that?

I think it depends. I wont finanace the project by covering costs if the material is over $500.The customer needs to show me they are serious buy putting us some money. However, I think as landscapers we dont have the relationship initially that a contractor would so you need to build trust before a person will hand over any substantial up front money. Really depends on the situation.

The sell is not the hard part. Building the trust and relationship is!

Jay

Steve
01-12-2011, 02:38 AM
Very true. I look forwards to your updates as you implement all this in the new year.

wellbiz
01-12-2011, 06:38 PM
Very true. I look forwards to your updates as you implement all this in the new year.

Steve,

No problem. I wish I had more time to spend on this. I thought I would be a lot slower this winter.

I am working on getting my Builders/Contractors License (been in training for the last two weeks), it seems to be snowing every other day which requires my attention to handle my snow accounts in addition I have been getting a lot of referral work for the Handyman work I do. I am not complaining, but to be honest I have this list I started in the summer of about 20 things I want to do this winter for the business (update website, design new flyer and door hanger, etc etc etc) and havent scatched off more then one or two.:D


Jay

Steve
01-13-2011, 02:47 AM
Well I am very happy to hear you are so busy! I'd rather see that than a lack of available work :)

USA Lawn Care
01-16-2011, 01:41 AM
Hi Jay,
When I started my lawn business I did billing like everyone else out there and assumed that mailing bills out at the end of the month and waiting for money to trickle in was just the way it had to be done.
Trouble is.......spring is expensive. Fuel costs, equipment if needed, maintenance, payroll if it applies......4 weeks of labor and expenses and THEN we decide to bill our customers. 3 more weeks and maybe most of your 1st month's billings have made it back.....but then you still had 3 more weeks of expenses.
I was in the business for 5 years full time......took 8 years off....2 years ago I went back in working smarter and now with tons of experience and knowledge under my belt. I decided that customers would 'pay as you go' (or pay as we mow to put it another way). Just like a restaurant. You come in and eat and pay your bill. Practically every other service out there is like that. What I found out is that my customers have absolutely no problem leaving me a check under the mat or paying me if they are home. They get an email the night before that we are on schedule and barring any unforseen circumstances, we SHOULD be there tomorrow to mow. The last 2 seasons I operated 100% in the black and always had cash flow. It kept my business growing steadily and got rid of the stress. 2 of my customers decided to pay me the month's mowing in advance because they are retired and travel a lot. If your business is large, I would activate an online method of payment (just like I pay 99% of my bills online). I will probably incorporate the online payment system in 2012. Customers will receive emails with links to pay their bill. My wife will know where I'm at and who's yard was just mowed and the customer will get an email immediately requesting payment before the next week's cut (or something like that).
Anyhow......just speaking from experience and I always have money in my pocket if I need to pick up another trimmer, etc.
Hope this helps.

Steve
01-16-2011, 03:22 AM
I was in the business for 5 years full time......took 8 years off....2 years ago I went back in working smarter and now with tons of experience and knowledge under my belt.

I am glad you brought this up.

Now as you look back, do you feel a lack of cash flow initial sunk your first attempt at operating your lawn care business? Or was it a combination of other issues as well.

I loved to hear more of your insight as to what you felt made you want to end your business the first time and how it is different now.

wellbiz
01-16-2011, 02:34 PM
Hi Jay,
When I started my lawn business I did billing like everyone else out there and assumed that mailing bills out at the end of the month and waiting for money to trickle in was just the way it had to be done.
Trouble is.......spring is expensive. Fuel costs, equipment if needed, maintenance, payroll if it applies......4 weeks of labor and expenses and THEN we decide to bill our customers. 3 more weeks and maybe most of your 1st month's billings have made it back.....but then you still had 3 more weeks of expenses.
I was in the business for 5 years full time......took 8 years off....2 years ago I went back in working smarter and now with tons of experience and knowledge under my belt. I decided that customers would 'pay as you go' (or pay as we mow to put it another way). Just like a restaurant. You come in and eat and pay your bill. Practically every other service out there is like that. What I found out is that my customers have absolutely no problem leaving me a check under the mat or paying me if they are home. They get an email the night before that we are on schedule and barring any unforseen circumstances, we SHOULD be there tomorrow to mow. The last 2 seasons I operated 100% in the black and always had cash flow. It kept my business growing steadily and got rid of the stress. 2 of my customers decided to pay me the month's mowing in advance because they are retired and travel a lot. If your business is large, I would activate an online method of payment (just like I pay 99% of my bills online). I will probably incorporate the online payment system in 2012. Customers will receive emails with links to pay their bill. My wife will know where I'm at and who's yard was just mowed and the customer will get an email immediately requesting payment before the next week's cut (or something like that).
Anyhow......just speaking from experience and I always have money in my pocket if I need to pick up another trimmer, etc.
Hope this helps.

Thanks, I appreciate the advice.

I considered this and have heard of a few other people who run their companies this way. To me it just seemed to be a billing nightmare. What happens when you show up to cut a lawn and the person is not home and/or they forgot to leave a check. Do you cut the lawn and stop back by another day to get the check? If you dont cut it then you have to make a seperate trip back to either collect payment or perform the service. Any wasted trip costs money and to me that is a big concern.

In addition a lot of my clients are elderly and dont own a computer let alone have an email address. Not slamming your business model, but it may add inefficiencies to my business system rather then simplify them. I love the idea, just not sure it would work in my situation...

I also like the way it helps with cash flow and eliminates the majority of receivable issues that we all struggle with.

What I am leaning towards is the automatic payment system and possibly monthly billing to the clients credit card.

Thanks for the tips.:D

Jay

jymie
01-16-2011, 04:18 PM
I always cut the lawn regardless if they are home or not, then at the end of the day go back for payment.

USA Lawn Care
01-16-2011, 05:24 PM
if the customer is not home, with the next email for the next week's mowing, I just remind them about a check for last week's mowing. It all works out.

and, as for my previous years in the business.....I went in blindly, learned as I went and the billing system didn't help matters much. It turned into having to have the cash available for spring and I learned that. The previous billing system didn't sink me but I finally just said to myself, "this is really stupid" and brought it to my customers when they hired me and always asked "so how do you get paid? Do you bill, etc.? Want me to leave you a check?" and I just haven't had an issue with 'pay as you go'. Customers I think find it easier to pay weekly then to have a bill at the end of the month (from what I hear). The other question was about older customers who might not have a computer or want to deal with it......I'll still take checks or cash at the time of mowing. That's why I said the online payment option will be 2012 (not this year) so I can look at the logistics of it. I think I just make it on option.....not sure yet. Either way, immediate cash flow is key. I think it will (and can) keep many a business alive and, really, you know right away if you're making enough money or where you need to adjust expenses. Pay for expenses with cash.....keep it in the black.....buy only when you absolutely NEED something. Start with a $100 trimmer if need be. It will be fine. I've seen a few for $89 out there. Sure the $300 Echo's (which I love) are awesome but buy when you have the cash and if something happens and you have to get out of the business...guess what...you have no debt to pay and you can sell your equipment.

musician/lawnman
01-16-2011, 06:55 PM
I am going into my 5th season & business is doing well but I have more or less come to accept that I will get burned for bettween $300-$800 a year.
It sucks, no doubt but the fact is there isn't a whole lot that 've found that can be done about it.
It gets me soooo aggrivated:mad: that If I were to steal a candy bar I end up i cuffs, If I took a $100 deposit for mulch & didn't show.... I end up i cuffs. If somebody stiffs one of us for even $300-$400 should that be considered theft of services? Nope, That's a "civil matter". You could file a lien & wait. or take em to court but if you win & they still don't pay, you can then..... file a lien & wait. You could hire a collection agency though I have had a single one (I've tried 3) collect a dime yet, I've done better on my own.
I've contacted collection attorneys but unless the debts are over $1000 per account they're not intrested as it's not worth it to them.... I've even offered to let them take 60-70% because I figured anything is better than nothing & I just wanted to put the big dogs on these schmucks. They wouldn't bite.
My monthly clients are required to pay by the 1st for the month to come. Yes, you read it right, they pay in advance. My monthly clients (75+ of them currently) understand that I am not going anywhere, my reputation & refferences assures them of that. But I have no other way to protect myself & even still I get burned because they get a little behind & I am a nice guy & keep working. most catch up, but some never do & then your the azzhole when you stop working for them & stand there wanting to be paid....
As you can tell I have become a little jaded over the years when it comes to this topic. I just feel like we should be able to meet a cop at their house with proof of their debt & either get paid or go home with their TV or something...

wellbiz
01-16-2011, 08:27 PM
I am going into my 5th season & business is doing well but I have more or less come to accept that I will get burned for bettween $300-$800 a year.
It sucks, no doubt but the fact is there isn't a whole lot that 've found that can be done about it.
It gets me soooo aggrivated:mad: that If I were to steal a candy bar I end up i cuffs, If I took a $100 deposit for mulch & didn't show.... I end up i cuffs. If somebody stiffs one of us for even $300-$400 should that be considered theft of services? Nope, That's a "civil matter". You could file a lien & wait. or take em to court but if you win & they still don't pay, you can then..... file a lien & wait. You could hire a collection agency though I have had a single one (I've tried 3) collect a dime yet, I've done better on my own.
I've contacted collection attorneys but unless the debts are over $1000 per account they're not intrested as it's not worth it to them.... I've even offered to let them take 60-70% because I figured anything is better than nothing & I just wanted to put the big dogs on these schmucks. They wouldn't bite.
My monthly clients are required to pay by the 1st for the month to come. Yes, you read it right, they pay in advance. My monthly clients (75+ of them currently) understand that I am not going anywhere, my reputation & refferences assures them of that. But I have no other way to protect myself & even still I get burned because they get a little behind & I am a nice guy & keep working. most catch up, but some never do & then your the azzhole when you stop working for them & stand there wanting to be paid....
As you can tell I have become a little jaded over the years when it comes to this topic. I just feel like we should be able to meet a cop at their house with proof of their debt & either get paid or go home with their TV or something...

I could not have said it better myself. I have come to accept it as part of doing business.

Jay

USA Lawn Care
01-16-2011, 09:15 PM
I am glad you brought this up.

Now as you look back, do you feel a lack of cash flow initial sunk your first attempt at operating your lawn care business? Or was it a combination of other issues as well.

I loved to hear more of your insight as to what you felt made you want to end your business the first time and how it is different now.

The first attempt at the lawn care biz actually went pretty well for 4 years. The 5th year started with a ton of clients retiring, moving, one $150/cut commercial account (along with the owner's $100 yard) went with a low-baller......the season just started out as the perfect storm. Combine that with cash flow issues I've described above, I was getting very frustrated so at the end of the year I licked my wounds, sold my equipment and got out. I was fed up with the lack of employees that I could trust....so...I needed a break. I also had taken on a lot of subcontracted work (probably too much) so instead of being self-employed, I felt like once again I was working for someone. It's going to rain....who's accounts get first priority? The guy who's paying half my salary for the week or mine. I jumped in full steam, learned a lot, had some fun, self employed for 5 years, learned how to plow snow and, despite an awful final year back then, gained a lot of self confidence and knowledge to do it again THE RIGHT WAY.

Steve
01-17-2011, 03:43 AM
No one has brought this up yet but, if a customer(s) fails to pay you, is there anyway you can some how use that as a deduction when filing your taxes?

musician/lawnman
01-22-2011, 03:10 PM
Not that I know of other than that obviously you didn't recieve payment on that amount so you don't pay taxes on it.

Steve
01-24-2011, 03:03 AM
This might be something to look into further.

Top Small Business Tax Saving Tips (http://www.legalzoom.com/business-management/running-your-business/top-small-business-tax-saving)

1. Unpaid invoices

Although nonpaying customers can be an annoyance during the year, you can claim any nonpayments from customers as a loss on your taxes. In addition, you do not need to take the deduction the year the loss occurred, allowing you to deduct unpaid invoices of the past on this year's return.